Housing supply and affordability: Evidence from rents, housing consumption and household location

We examine the effects of housing supply constraints on housing affordability, which we measure directly using quality-adjusted rent as well as indirectly using structure sizes, lot sizes and household location choices. Empirically, we find that housing supply constraints have only modest effects on...

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Bibliographic Details
Published in:Journal of urban economics 2022-05, Vol.129, p.103427, Article 103427
Main Authors: Molloy, Raven, Nathanson, Charles G., Paciorek, Andrew
Format: Article
Language:English
Subjects:
Affordability
Housing supply
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Summary:We examine the effects of housing supply constraints on housing affordability, which we measure directly using quality-adjusted rent as well as indirectly using structure sizes, lot sizes and household location choices. Empirically, we find that housing supply constraints have only modest effects on rents and housing consumption despite their larger effects on city growth and the price to purchase homes. Calibration of a dynamic, spatial equilibrium model shows that supply constraints increase price-rent ratios because investors expect future rents to increase more with expected demand growth. Because rent is what matters for affordability, supply constraints have reduced affordability less than is commonly understood despite their sizable effects on the purchase prices of homes.
ISSN:0094-1190
1095-9068
DOI:10.1016/j.jue.2022.103427